# The psychology of premium branding **Channel:** Matt Clark **Source:** https://www.youtube.com/watch?v=OfKxzjT5WO4 **Transcript page:** https://www.withtranscript.ai/video/OfKxzjT5WO4 ## Chapters - 0:00 — Why Premium Brands Win - 0:59 — Three Pricing Models Explained - 5:08 — How Premium Brands Create Demand - 9:48 — Pillowcase Branding and Social Proof - 12:19 — Supplement Offers and Final Takeaways ## Transcript **[0:00]:** So this brand, Blissy, charges $70 for a pillowcase. This company, Goons, charges $70 for a multivitamin. And then this company charges around $70 for a dog chew supplement. We, selling coffee, high-end coffee, we charge about $28 for a bag of coffee while everyone else is stuck in discount land selling $14 bags of coffee, $10 pillowcases, or cheap supplements. All of these brands have sold hundreds of millions of dollars, including us as well, by selling premium products. So in this video, I'm going to break down the psychology of premium brands and more importantly, how you could actually build one yourself. **[0:49]:** So I've been in business for 17 years. I've sold about half a billion dollars online almost exclusively of premium brands. And here's how you do it. **[0:59]:** All right, so there's three main pricing models you can pursue and all of them can work and you'll find plenty of examples of products that you probably will buy yourself that do apply these pricing models. So the first one is discount. So the whole nature of a discount pricing model is to be the cheapest product out there. And so anytime you can sell at a discount, some subset of customers will beat down your door. Doesn't matter where you're at in the middle of the desert to get a discount on the product. And so with a discount model, you basically sell it as a high volume as possible so that then you can buy the product or make the product even cheaper. And then you can sell it at an even lower price, which allows you to sell it at an even higher quantity and sort of the cycle repeats. **[1:40]:** So that's the discount model. The problem with the discount model is it typically requires a lot of capital because you need some way to buy or make this product in a high enough quantity for it to make sense. You also have to be relentless about keeping your costs low. This is how Costco is able to build such a massive business because it sells a large quantity of at the cheapest price possible. And this is why it's also a pain in the butt to sell products into Costco, especially if you're a premium brand owner, because they will beat you up on price like nobody else. But that's their whole business and that's why customers love them. The one time I ever shopped at Costco, I loaded out my cart with $500 worth of stuff, all massive quantities of things. I don't know if I needed it, but I felt like I was getting a good deal. **[2:21]:** So that is a model, but because of the complexity of selling at the lowest price, making a product that's cheaper, and the cost required to buy in such a high volume to actually have a better price, this is not the model I recommend for most people. The second option is premium. So here's how the premium pricing model works. So anytime you're selling a premium price, you're going to sell a bit higher, obviously than a discount, but higher than even your average priced product, and that's going to give you more margin per unit that you sell. Because you imagine if the thing costs you $10 to make and a discount seller is selling it for $12, but you sell it for $30, you've got more margin than they do. And that allows you to invest in more marketing. And this is where the cycle starts repeating. **[3:08]:** You think about companies like Nike that they're able to pay these athletes tens of millions of dollars per year. In some case, I believe over $100 million for a single top-tier athlete. That allows them to justify their higher price because they build brand recognition and people know that if they want to be like Mike, for example, they can't go buy some other brand. They've got to buy Nike. And so that allows them to justify their high price. It allows them to maintain their high margins. They invest more in marketing and the cycle repeats. And then they end up making a bunch of money. And so this is the strategy that doesn't depend on buying a whole lot up front. It's really just doing good marketing. So in most cases, I recommend you pursue a premium pricing model. The last option is luxury, which sometimes people confuse with premium, but it's a totally different game. **[3:58]:** So this is where the price is a signal of the value the product provides. For example, you're selling like Rolls-Royce or Ferrari where people are spending hundreds of thousands of dollars on a car, not because it's objectively better or even marginally better than a lot of other cars, it's just because it signals to other people that they have the ability to afford to pay for that. The challenge with this is it can be a lot harder than premium because this is a totally different psychology that's required to sell luxury products. So in this cases, you have to be relentless about protecting the quality of the brand. You hopefully have some really powerful story behind the brand and every detail of everything you do has to be completely buttoned up and even there, there's no guarantee of success because people don't really need this. So you have to have some reason that you for a brand out of nowhere people are going to pay 10 times as much for when they can get functionally a good enough product that's premium. **[4:50]:** So this is a different strategy that can work and we'll see examples all over the place of businesses that have been been built very big with luxury products, but premium is the sweet spot. Discount too hard, luxury too hard, premium is the way almost all of these brands today are being built. **[5:08]:** As you go from discount to premium to luxury, the price goes up and typically as you go from luxury to premium to discount, your volume actually goes up most of the time. However, because of this flywheel, and this is how these companies that I'm going to show you in a second are producing hundreds of millions of dollars in sales and ourselves included, the way we've been able to do this is because we were actually able to get this flywheel working for us where we invested more marketing, so it helped us build a bigger brand and that allowed us to actually increase volume with a premium product. So let's take a look at those pages that we just saw for those products and figure out how are they able to charge these premium prices. So let's take a look at the dog joint supplement. So the first thing is that they have very high quality product photography, which is kind of a given. **[5:57]:** This is very easy to do. Now you can do it with AI. You can also just pay somebody literally to take photos of of product. They also have a high quality looking website. I can't tell you how many times when I've been advising an e-commerce business owner, even one doing a couple million bucks a year, and their website looks terrible. Like, this is so easy to do with AI today, and I've got a ton of other other videos on this channel if you want to learn how. But first off, just general level of design quality is important. Next thing is is there's a few things that they are doing that you may think are hard to do. First off, they have some sort of study that they've done that says 90 99.1% of pet parents notice their pups were happier. This is a thing where you can literally just survey customers. **[6:35]:** Or there's companies that are out there that will do this stuff for you. And so it's adding proof to the product where what you want to do whenever you're selling a premium product is for it to feel like there's no other substitute. Cuz then if they have a stat like this that looks like they've done some sort of study, then anytime that they're considering on Amazon or anywhere else buying some other product and they don't have that sort of study done, then all of a sudden people are going to be like, well, I don't know. Like, maybe it's worth paying an extra, you know, $20, $30, $40 for this one. Also, they have a strong guarantee because the thing is when you're selling a premium priced product, you're going to get a higher quality buyer, which are typically less of a pain in the butt if you're selling a good **[7:16]:** product. And by offering a guarantee, you also have the margin even if some people return it, it doesn't matter cuz you're making a lot of profit per unit versus if you're selling a discount product and you're only making a dollar or two per unit and people start returning it, then all of a sudden you're in um negative profitability. And so including a strong guarantee is key for premium priced products and you're allowed to do that because you have the profit margin to afford it. And then they offer a few different purchase options. So the way to make this work is you got to get people to buy more up front. So they're either trying to get you to commit to subscription up front or a 90-day plan, three tubs. You don't see anywhere on here an option for one tub, which is super smart. That's exactly what we do. **[7:58]:** If I were to show you our sales page, our main sales page includes a minimum of three bags. So they're doing the exact same thing. And this brand, by the way, I looked up $100 million in annual revenue selling these dog chew supplements, where I can tell you because I know the Amazon game because I've been doing it for a long time, there are a lot of people out there selling dog chew supplements on Amazon that are barely doing a million dollars a year. And they're doing it with a product that's much more expensive, and that's part of the reason why they're able to do it. They also tons of reviews. And so this is another thing, too, is like when you have the margin, you can go out there and deliver the best quality service possible, better than anybody else cuz they don't have the profit to be able to **[8:40]:** afford to provide that level of service. You can do that. You can provide free and easy returns. You can give bonuses. You can give gifts. You can give better packaging. All the things. And you also have the team that you can possibly go out there and recruit these kind of reviews for you. So including as much social proof is another thing because you want it to feel like they're not the first person to give this product a try because that's going to make people feel more comfortable pulling out their credit card. And so this is another thing where they're selling as specifically as possible. So this is part of the study that they did. And this isn't even like a formal study. This is based on a survey of their customers. And so they also include specific data from that same survey, lots more social proof, which by the way, you can get this from actual customers or there's lots of websites out there that'll let you basically go give free **[9:28]:** products to influencers or they can buy them or you can pay them either way depending on the nature of your business. And you can go out there and get these kind of videos and testimonials all day long. And that's exactly what all of these companies are doing. They're also very specific about the ingredients and products being included. They're not just speaking in vague generalities. And that's part of the reason why these people are crushing it. **[9:48]:** Now let's look at these people. They're selling $70 pillowcases. And so they also are being as specific as possible about why the heck would you pay this amount of money. First off, this is a, you know, terrible photo. Looks like somebody took it with their photo on their bed, which is intentional. And this is their fancy photography that they have with their case and everything. And so they're basically trying to make the case of why would pay so much for this pillowcase. And they're also going beyond the basic reasons why somebody would buy this product. So a lot of cases you're like, oh, you know, pillowcase, like who cares? It just keeps my pillow from getting dirty. They're making the argument that it's actually going to make your hair healthier, that it's going to make your hair better. That's where you start getting people to pay more. **[10:29]:** People are only going to pay so much to make their pillow not get dirty when a lot of pillows are relatively cheap. They're going to pay a lot more if you're able to give them some sort of beauty benefit like this. And then we'll see what else they got here. Also hypoallergenic. So once again, they're doing the same thing where they're trying to separate their products from everyone else's because anytime now anybody's looking at any other pillowcase and it doesn't say it's hypoallergenic, all of a sudden they're going to be, maybe I should just go pay the 75 bucks and buy this pillowcase. And then they're also giving a bunch of social proof, 232,000 five-star reviews. So yeah, it's expensive, but a lot of other people have bought it, so maybe you should too. Lifetime guarantee will last a lifetime. And then also you'll find this very commonly on these sales pages is right now it says one time only 55% discount. **[11:18]:** So they're making the case of why you should buy this product and then also why you should buy it right now. And so people have gotten very excited by reading this page. Now you need to give them some sort of incentive to make their purchase today. And so their funnel is a little bit complicated by the way, but they're doing extremely well. And so here's where they include their different purchase options. They're doing the same thing where they want you to buy as many as possible. So the default option selected here is actually four pillowcases. And it says 49 47 each, but it's really each. And so the total price is $197 for pillowcases. How often do you wake up in the morning and you're like, it would be awesome today to spend $200 on pillowcases? Not very often, but if you care about your hair and you've read their story and you think it's a good high-quality product, you will go out there like, you know, people are buying $100 million worth of these things **[12:04]:** a year. And then here's their single pillowcase option. They make it seem as least exciting as possible. And tons more social proof. Once again, if you're going to charge a premium price, you need as much proof as possible that other people similar to you have bought it and been happy with it. **[12:19]:** So, last example we're going to go through real quick is Gruene's. And you'll notice a lot of the same elements. So, right here, 4.8 stars, 100,000 reviews, a million members. And so, this is also showing their social proof. Now they, because I've looked at them a bunch before, they actually did a clinical study on their product to prove that it does what they say it does. The thing about those is it's going to sound crazy, and this is a little bit of like a dark secret of the supplement industry. I'm not saying they did anything wrong, but these clinical studies, you can go pay people to do them. There's literally companies who their entire job is for supplement brands. They will do validated clinical studies for your brand. You pay them, you know, $10,000, $30,000, $40,000, which is a drop in the bucket for these companies that just sold for a billion dollars. **[13:03]:** They will do these clinical studies for you. And if you don't like the results, you don't have to report them. And so, not saying all these companies do that, but it's very much possible. But it's validating that people should pay premium prices for this product. Then high quality website, high quality photography. They talk more about social proof down here, million plus customers. They have their offer, which once again, they're trying to get people to either sign up for subscription or buy one for $67. And then they try to upsell you further after that. They also give you free gifts to justify their higher price and free shipping. They act like it's a free gift, but it's a really a gift, I'm not sure. Variety pack. They're throwing in a canvas tote bag and these other things to butter up the offer to get you to subscribe and save for a subscription offer, which allows them to invest even more in marketing because they know people **[13:51]:** that sign up for this are going to give them more money a longer term, which allows them to spend even more money upfront to acquire customers. And they also have a 30-day money back guarantee. So, they make all these claims, they have all this social proof, they charge a premium price, and they're like, if you don't like it, you know, we'll give you your money back. 30 days, no problem whatsoever. So, this is the general psychology of how these premium brands are able to sell hundreds of millions of dollars per year. If you want to go deeper into how this specific brands Gruen's was able to sell for a billion dollars in three years, watch this video next. If you instead want to learn exactly how to create these kind of pages for your own brand, watch this one next and I'll see you there.